According to global real estate consultancy Knight Frank, supermarkets and family entertainment are dominant in Riyadh's retail environment. This is spread across 25 super regional and regional malls, which collectively cover an area greater than 1.4 million meters squared. Each location utilises an average of 8,000 meters squared and 5,300 meters squared, for supermarkets and family entertainment respectively.
According to Knight Frank's most recent research, the Saudi capital's present retail supply is estimated to be over 3.4 million square metres.
REGIONAL AND SUPER-REGIONAL MALLS DOMINATE RIYADH’S RETAIL SUPPLY
This supply is dominated by regional malls, which make up 47% of the entire supply.
Super regional malls presently make up around 17% of the current total supply. Most of the planned pipeline for future projects is comprised of super-regional malls (46%), followed by regional malls (35%). Jawharat Al Riyadh is an impressive upcoming super-regional mall, in particular, that will cover an area of 150,000 meters squared.
Megastores, like supermarkets and department stores, make up the bulk of the larger malls. The three most well-known anchor store brands in the Saudi capital are Zara (25%), H&M (25%), and Redtag (20%). Equally, the two biggest retail operators in Riyadh are Arabian Centers Company (23%) and Hamat Property Company (12%). So, a significant quantity of the supply is controlled by a relatively small amount of players.
SHIFT TOWARDS ENTERTAINMENT LOCATIONS FUELLED BY VISION 2030 AIMS
The Kingdom’s Vision 2030 aims are also fuelling a spectacular shift across the Kingdom of Saudi Arabia. Knight Frank highlights that the retail sector is playing a key role here. Equally strong investment from Saudi Entertainment Ventures worth $13.3 billion is being invested to construct world-class entertainment locations. So going forward, entertainment is increasingly likely to play a greater role in Riyadh’s retail sector.
International retailers' desire to enter the Saudi market also keeps growing in line with Vision 2030. 60% of the international investment licenses granted in the second quarter of this year went to retail and wholesale companies.
There is also a prosperous potential for retailers due to the plans to increase Riyadh's population to 17 million by the end of the decade from its current level of roughly 7.5 million.
What is obvious, though, is the speedy growth of leisure and entertainment offerings. Over 50% of the new retail space in Riyadh is expected to be devoted to entertainment. This is apparent in the example of the anticipated 300,000 sq m Mall of Saudi, which will include sizable sections dedicated to dining, leisure, and entertainment. But this is also clear within Saudi Entertainment Ventures’ Al Hamra Entertainment Hub.
Knight Frank’s research also finds that cinemas make up a significant portion of the entertainment options in Riyadh's malls. Muvi Cinemas (28%), VOX Cinemas (20%), and AMC Cinemas (8%), together control 66% of the top five entertainment companies. Spark's (24%) and Billy Bees (20%), two market leaders in children's entertainment, also lead in the retail sector.
DEMAND FOR BRICK-AND-MORTAR STORES RISING DESPITE E-COMMERCE THREAT
The property expert also claimed that despite the e-commerce industry's explosive rise, Saudi Arabians' desire to run physical businesses in malls continues to grow. Most notably, there is a rise in creative ways to combine physical stores and online purchasing. Using QR codes to enable in-store pickup of online orders is a key example.
OVERALL STATE OF RIYADH’S RETAIL PROPERTY SECTOR
Despite being dominated by regional and super regional malls with a strong presence of brick-and-mortar stores, Riyadh’s retail property sector is seeing a push towards leisure and entertainment offerings. This is not surprising either when considering the influence of Saudi Arabia’s Vision 2030 aims.